Banks, Direct Speech, Estonia, Financial Services

Some three quarters of all the domestic payments made in Estonia are made within one bank. Estonian companies and residents made an average of 119,000 interbank payments a day in August, which are payments where the accounts of the payer and the payee are in different banks. Of these interbank domestic payments, 61% were made within a few seconds in August, which is 14% more than a year earlier. Estonian banks are notably more active in instant payments than other European banks are, as it is estimated that 7% of interbank payments in the euro area on average are instant payments.

“Estonia’s success in introducing instant payments is very satisfying, as it is to note that we are not just running a few steps ahead of the rest of Europe in this, but we are a whole lap of the racetrack ahead. By now 71% of cross-border euro payments are also made in a few seconds, which is increasingly important for Estonian companies that do business abroad”, said Rainer Olt, head of the Eesti Pank payment and settlement systems department.

“Despite our success, we cannot yet say that all payments are made within seconds. Payments initiated in bank offices for example, or cross-border euro payments are not necessarily so fast in every bank. It is good to see though that the banks are steadily moving time-critical payment initiation solutions over to new systems so that payments can be made in a blink of an eye at any time of the day or on any day of the week”, he added.

The share of instant payments may increase further in the year ahead

The Estonian banks that provide instant payments are SEB Pank, LHV Pank, Swedbank, Coop Pank and Citadele Pank. Those banks account for 93% of all of the domestic interbank payments. When Luminor Pank joins the instant payment system, this share will rise to 99.5%.

For bank clients to receive money on their account within seconds when it has been sent from another bank, the receiving bank also has to be part of the instant payment system. If the receiving bank has not joined the system, the money arrives on the account within two or three hours on working days, while payments made on Friday evening only reach the payee on Monday morning.

Even when both the payer bank and the payee bank are in the instant payment system, it must be remembered with time-critical payments that the money may take longer to arrive if for example the payee bank needs a reference number for the payment but it was not given when the payment was initiated. It can also happen that payments cannot be made as instant payments if the payee name is given incorrectly.

The banks are free to choose whether to offer instant payments, and also to choose which payments they classify as time-critical. Payments that have been set up as standing orders currently move as ordinary payments in the larger banks, but for these the bank can itself allow sufficient time so that the money reaches the payee on time. Mass payments by companies, such as wage payments, are generally sent with sufficient time that they reach the payee on time whichever system is used.

There are other differences between the banks that have joined the instant payment system

In August, 96% of the domestic interbank payments initiated by clients of Coop Pank were sent as instant payments. Coop Pank sends all its payments that are under 100,000 euros through the instant payment system whether they were initiated in the internet bank, the banking app or a bank office. The bank said that this share of payments will rise further when more banks join the instant payment system.

The share of payments that were instant payments at LHV Pank was 92% in August. LHV Pank also sends all payments of under 100,000 euros initiated in any of its channels to the instant payment system. Payments from the internet bank and the mobile bank, and those sent automatically by the financial software of companies through the app interface are sent as instant payments.

At SEB Pank, 75% of payments in August were instant payments. SEB clients should remember that payments initiated in bank offices, payments made through the banking app, and mass payments by companies are not yet sent as instant payments. Tatjana Grünvald, head of business development and daily banking at SEB, noted that SEB is continuing its transition to instant payments and in future it plans to make mass payments as instant payments. Users of the banking interface can use the new Baltic Gateway service, as payments initiated there are sent as instant payments where possible. Given the large share of payments that are made within the bank, 93% of all the domestic payments made by SEB Pank clients are made instantly.

At Swedbank, 38% of all the domestic interbank payments made in August were instant payments. “More than 90% of the payments of Swedbank clients now move within seconds, primarily because most of the payments made by our clients are within the bank. Our clients can initiate instant payments to other banks through the mobile app and the internet bank. We also provide instant payments to clients of other banks as an open banking solution”, said Ede Raagmets, head of client services at Swedbank.

Luminor Pank plans to join the instant payment system next year. The bank explained that it is fully aware of the expectations of the market for the use of instant payments and will certainly start providing them. The delay in joining the instant payment system has mainly been a consequence of the transition to a new banking system and internet bank, which it is planned should be completed by the end of the year.